Anarchy and Property Rights in the Virtual World: How Disruptive Technologies Undermine the State and Ensure that the Virtual World Remains a 'Wild West'

For all intents and purposes, most actors in the virtual world operate under conditions of anarchy. While formal, de jure law attempting to regulate the virtual world proliferates, such law is so easily circumvented and so rarely enforced as to be safely ignored — for both practical and analytical purposes. When we fail to recognize the anarchic nature of the virtual world, we come to fundamentally incorrect conclusions about how best to think about that world. Once such incorrect conclusion, proposed by legal scholars like Lawrence Lessig and Jonathan Zittrain, is that the Internet is on the whole moving towards an era of greater control and regulation. In contrast, I argue that in many fundamental ways, the virtual world — which includes, but is not limited to, the Internet — is moving towards an era of less control as state capacity to regulate the virtual world rapidly diminishes. In this paper, I demonstrate how three disruptive technologies — file sharing, 3D printing, and distributed digital currency — have severely undermined the legal and regulatory capacity of the state, resulting in an anarchic environment where actors’ behavior is determined primarily by factors other than legislation or governmental authority. Additionally, I examine how a particular group of actors — property owners — copes with the challenge of protecting property under conditions of anarchy. I show that property owners frequently engage in various forms of self-help and limited cooperation to protect their assets. Both resort to self-help and limited cooperation are theoretical implications of anarchy, and provide further evidence that the virtual world is characterized by anarchy.